Every time a towering skyscraper rises in Shanghai or a new bridge spans the rivers of Beijing, there’s a hidden engine powering that progress — the rich, red earth of Western Australia. Whether it’s iron ore for steel, lithium for electric vehicles, or coal and gas for electricity, much of the raw material behind China’s rapid industrial growth has come from one country: Australia.
This isn’t just speculation. The data tells the story. In 2000, Australia exported just $3.47 billion worth of goods to China. Fast forward to 2023, and that number had exploded to more than $156 billion. This makes Australia one of China’s biggest trading partners, with the fourth-largest share of Chinese imports. But what matters more than the total value is what China is buying.
Unlike South Korea, which exports high-tech equipment like semiconductors and machinery, Australia sends the fundamental building blocks — ores, fuels, and raw materials. China doesn’t just trade with Australia; it depends on it. Without Australian iron ore, China’s massive steel industry would face serious bottlenecks. Without Australian coal and gas, its energy grid would be far more vulnerable. And without Australian lithium, its electric vehicle industry — the world’s largest — would face a serious crunch.
A Supplier of Essentials
Australia isn’t just a regular trading partner for China; it’s a critical supplier of essentials. Despite political tensions, this underlying reliance keeps trade flowing. While headlines may suggest rocky diplomatic waters, the cargo ships loaded with iron ore and coal keep sailing.
One of the most important regions in this trade relationship is the Pilbara in Western Australia — home to some of the world’s largest iron ore reserves. Major mining companies like BHP, Rio Tinto, and Fortescue Metals Group operate vast, 24/7 mining operations there. In 2023 alone, Australia shipped $71.8 billion worth of iron ore to China, representing over 64% of China’s total iron ore imports. That’s not just a dominant share — it’s a near-monopoly.
The story is the same for other key commodities. Natural gas, lithium, and coal all follow the same trend: China is buying big, and Australia is supplying heavily. This makes Australia vital to China’s economy — but it also creates a quiet vulnerability on Australia’s side.
The Risk of Overdependence
While China benefits from steady supplies of essential materials, Australia benefits from the enormous demand that China brings. But this has created an unbalanced relationship. A look at Australia’s export data by country in 2024 shows that over $102 billion of exports went to China — more than three times the amount exported to the second-largest partner, Japan. That means over 37% of everything Australia sells to the world goes to one country.
What happens if that one country stops buying?
The answer came in 2020. After Australia called for an independent inquiry into the origins of COVID-19, diplomatic relations with China soured. Without warning, China imposed an unofficial ban on Australian coal. Ships carrying millions of dollars’ worth of coal were left stranded at Chinese ports, unable to dock.
The effect was dramatic. In 2019, Australia supplied nearly 48% of China’s coal imports, worth over $8.4 billion. But by 2021, that figure dropped to just $685 million — a mere 2.84% of China’s coal imports. Australia was forced to scramble for alternative markets. Meanwhile, China experienced power shortages, partly due to supply issues. While other factors contributed, the loss of Australian coal clearly added to the pressure.
The episode underscored just how vulnerable Australia is in this economic relationship. When trade is going well, both countries prosper. But when things break down, it’s Australia that bears the brunt.
Chinese Investment and Influence
The trade imbalance doesn’t stop with resources. Chinese companies are also expanding their footprint in Australia’s domestic economy.
Electric vehicles are a perfect example. In recent years, EV brands like BYD and MG — both Chinese-owned — have captured a significant share of the Australian EV market. Even Volvo and Polestar, which are perceived as European brands, are either owned or partly controlled by Chinese parent companies. These firms are not only selling cars in Australia but also shaping the future of its automotive landscape.
Beyond vehicles, Chinese businesses have invested in Australian energy, agriculture, and real estate — sectors that give them long-term influence. For example, Yancoal, one of Australia’s largest coal producers, is a subsidiary of a Chinese company.
This kind of investment adds another layer to the mutual dependence. China isn’t just buying from Australia — it’s building deep roots in the economy.
A Delicate Balancing Act
In the end, the Australia-China trade relationship is a story of mutual dependence with unequal power. Australia provides the materials that keep China’s factories, cities, and infrastructure running. But it also relies on China’s massive market to sustain its own economy.
The imbalance is clear: China, as the larger economy, holds more leverage. If China walks away, Australia faces a steep cliff. If Australia walks away, China faces higher prices and slower growth — but it has more alternatives.
And yet, despite these risks, the relationship has brought enormous economic benefits to both sides. China has fueled its industrial revolution with Australian materials, and Australia has enjoyed decades of export-led growth.
But the trade-off is vulnerability. Australia must navigate this relationship carefully, balancing economic gain with strategic independence. Diversifying export markets, investing in domestic industries, and building more resilient trade links will be key for Australia in the years to come.
Until then, the red earth of Western Australia will keep flowing east — powering China’s growth, and Australia’s economy along with it.